Issues: Sirius’ head start, raise capital, be early, pressure to mimic Sirius, how to distribute, how to price, how to earn, sub or ad, single or tiered, manufacturers (how to proceed and which ones to contact), how to market –to consumers or to manufacturers and retail chains.
Recommendations: Start off with higher radio and subscription prices because the market will take time to develop and XM should not be the bearing the brunt of the development costs. Later, lower prices on both aggressively in order to attract more subscribers and begin to introduce limited advertising. Work with auto manufacturers, offer subsidized prices, let radio manufacturers and retailers handle the home and aftermarket markets, offer subsidies. Target the male market and Hispanic/other direct, cell phone, content providers

1. What is the value proposition of XM to different consumer segments? Who should be the primary target market for XM?
XM caters to the various consumer groups and better targets everything from broad groups to small niches. XM will offer better, more focused content to the consumer at a reasonable cost with ease of use and cheap to start and fewer commercials.
XM should target the market that is most likely to result in paid subscriptions and to which its content is geared, look it up.
2. What aspects need to be considered in pricing the radio receiver and subscription fee? What is the optimal price for a monthly subscription?
XM needs to consider the affect on the number of end subscribers based on the cost of the receiver and the subscription fee. They already did studies that give insight into which price points might be most effective, see spreadsheet. Clearly, XM will need to be sure of where the breakeven point is and what the scalability is and what the likelihood of meeting such thresholds might be.
Based on the spreadsheet calculations derived from the research study numbers, the optimal price for a monthly subscription is ??
3. How should the price of the service change over time? Should you price high initially and then decrease it over time or vice versa?
The price of the service should be reassessed continually. Obviously, if the long term viability is in jeopardy due to a faulty pricing structure, the price will need to change to adapt to reality rather than expectations and estimates. Also, it is not beyond the realm of possibilities than advertising income would completely change the cost structure over time based upon distribution and other factors.
XM should price low initially and then increase it over time. XM is very much a business of scale. It’s long-term viability is tied closely to its ability to increase its subscriber base. The company will have more options in terms of how to generate revenues if its subscriber base is high, whereas if the subscriber base is low due to high subscription prices, each subscriber might help offset losses on an individual basis, but potential revenues through mediums such as advertising will be exponentially lower the fewer eyes that see them. That being said, it is generally more difficult to raise prices than to lower them. It comes down to pricing power which would likely only exist if there is high and limited demand for the products or services they offer, and if the subscriber base is so low that higher prices are the only way to increase income, that would suggest that demand is not sufficient to merit a price increase and XM would have to find an alternative method to increase the bottom line (or create a bottom line).
4. What aspects need to be considered in allowing advertising to run on XM’s service?
XM needs to figure out how advertising would affect its subscriber base. Would the income generated from the advertising more than offset the potential drop in subscriptions? And is it purely a matter of degrees? In other words, would subscribers drop off exponentially the more advertising minutes per hour increase? And where, if there is one, is the sweet spot where the maximum net income can be generated from the advertising in spite of the loss in subscriptions? Also, do the content providers care whether or not advertising is allowed? They say content is king which might lead the content providers to either charge more for their content or to maintain exclusivity on the advertising provided during their programming. Also, the receiver manufacturers might be concerned about their ability to sell advertiser supported receivers and potential cannibalism of their other products as well as credibility from selling previously touted no-ad receivers to now advertiser supported receivers. They also say cash is king, which means the consumer that is currently providing the cash will now have less and less of a say the more the company relies on advertising dollars. Surely, however, a balance can be struck.
5. What are the implications of the expected launch plans for XM’s rival Sirius?
It is implied that Sirius will most likely enjoy first mover status, which could also be beneficial to XM. It is a brand new market and Sirius may very well pave the way for XM at its own expense. Sirius will undoubtedly need to spend plenty of dollars simply to make the consumer aware of the new service (which benefits XM). Sirius will also roll out is subscription service and receiver distribution strategy which XM will be able to observe and learn from any mistakes. However, it is also implied that there will be a huge first-mover advantage and that the prospective market share will be gained in the very early stages of the launch and that XM will need to speed their launch date in order to compete for said market share and help benefit from the new service awareness. XM will also certainly give up some portion of the market to Sirius by nature of competition and preference, and also determining content providers, etc.
6. What revenue model should Robert Acker recommend that XM pursue to capture value from satellite radio?
Acker should recommend a very low cost subscription model with the intent to establish a critical mass subscriber base while still generating some revenues and then pursue an advertiser-enhanced revenue model, with limited and expensive, but powerful and directed opportunities for advertisers. They may also allow content provider paid slots, similar to the olden days of advertiser sponsored programs, perhaps with a more covert campaign similar to the product placement campaign often seen on popular television programs (Snapple on 30 Rock). Perhaps the advertiser would pay the content provider directly to produce the ad related content and then the content provider would pay XM to air the content, however, it would seem more plausible for such a strategy under a subscription based model where the bulk or all of revenues are derived from the subscribers. To what extent are the content providers restricted from including product placement in their content in any case? They could theoretically bypass XM and allow ads on their programming for a fee at the risk of losing listeners.
7. Given the business model selected, what should the marketing plan for launching the XM service be? (Communication strategy, channel design, pricing and incentives)
Being a new market, they will have to create a marketing plan geared at creating awareness, but, to the extent possible, not promote Sirius in the process. They will need to tie XM to satellite and own that space and make XM equivalent to satellite radio. The best way to do that would be through making the jump to the new service incredibly simple, low cost, compelling, etc. They may want to use contest, viral, mobile, grassroots campaigns with big name content providers (Howard Stern, Glenn Beck).
Channel design will play a surprisingly big role in XM’s success. To the extent that they are able to make receivers widely available and seem-less in their functionality, XM will exponentially increase their likelihood of success. They will need to target the new car market in order to create an entirely seem-less transition to satellite radio and make it a mutually beneficial arrangement where the manufacturer benefits from the added perk of satellite radio without a hit to the bottom line. Another major channel will be the internet, not widely discussed in the case. Looking out many years, I imagine the handset to be the driver of all personal communication and media. XM will need to make satellite radio a mainstay on all handset devices. Longer term, the handset will act as a totally personalized everything, including media, device. Cars will play media based on the personalized settings of the individuals handset, as will tv, radio, spending, etc. XM will need to be aggressive in the mobile device market and attempt to be on all mobile devices. They might target the operating system providers or the manufacturer in order to be included on every device right from the outset, similar to a word processor on a computer, or an internet portal on a cell phone, or a radio in a car, or a channel on the tv. To that point, they will want to be a mainstay in all those areas.
Pricing will partially dependent upon content providers. If the content offered through XM is truly King, a subscription model with an easy entry point will be suitable. However, if the long-term model is advertiser based, pricing should be free or close to it, and the focus should be on scale and getting into the hands of every person while at the same time having very market segment specific content and thus, a more compelling offering to advertisers.
Incentives should be free subscription to try out the service, and with such a low subscription model that may ultimately turn to ad-enhanced, consumers will not feel the need to cancel. They may also include contests, programming offers, etc. in order to generate buzz.

Survey 51: Radio Not Reaching Youth
Published 4 days, 9 hours ago
The radio industry needs to better use the local internet and reach youth, according to AudioGraphics Survey 51, released this month. 41 internet radio stations participated in this survey, using proprietary software that I created in 2002. Each survey is branded to the serving station. 951 persons responded, and online results, tallied with the assistance of Borrell Associates, are posted